Government contractors are losing their upper hand in hiring and retaining the best and brightest former feds, as several economic forces under way hint at a potential mass migration from the private sector to public service.

Historically, private sector companies could use higher salaries to lure talent from the federal government. Though factors beyond big paychecks now influence potential hires, from cutbacks on outside contracting to the promise of long-term security.

“Government employment is growing more attractive during the economic downturn because it brings job security and the comprehensive benefits that a lot of private sector firms are doing away with,” said Alan Balutis, director of Cisco Systems Inc.’s Internet Business Solutions Group, who left government in 2001 after 25 years in leadership roles at the Department of Commerce. “At the same time, you have an administration that has emphasized a need to rebalance the work force.”

That rebalancing is a major contributor to the job shift. After President Barack Obama announced a crackdown on wasteful spending in government contracting, the Office of Management and Budget released a July 2009 memo that required civilian agencies to better track their outsourced work and analyze, and possibly restructure, programs that may rely too heavily on contractors. The memo also instructed agencies to review what constitutes “inherently governmental” work, which federal employees must perform.

Those efforts are still under way, but such an assessment will likely increase the employee count at the Department of Homeland Security, which has had a disproportionately high percentage of contractors since its hurried creation after the 2001 terrorist attacks. DHS already announced plans to grow from about 250 employees to as many as 400.

Contrast that with the Department of Defense, where cost-cutting plans took what some analysts called a less-strategic approach by eliminating as many as 33,000 contractor positions. Defense Secretary Robert Gates opted to save money by reducing funds by 30 percent through 2013 for support contractors and by 10 percent immediately for advisory and assistance contractors at the defense intelligence agencies.

For one employee of a large Fairfax-based defense contractor, the writing is on the wall. He provides information technology support services to the Office of the Secretary of Defense and applied recently to work full time at the department. His motivation? Gates’ announced program cuts.

“My main reason for applying for a government job was really job security,” he said, requesting anonymity to ensure his current employer doesn’t learn of his desire to move on. “They’re tightening the reins, and there’s no way to know for sure whether my project will even be around next year.”

More and more, security is trumping salary. Statistics from the Bureau of Labor Statistics show that the private sector still pays better. Private sector employees are earning 24 percent more than their federal counterparts in 2010, up from 22 percent last year.

Some say agencies are finding ways to offset the salary disparity as well. Rather than hiring contractors to do the same work for less money, for example, agencies are slotting them into more advanced positions that command higher pay, said Cord Sterling, vice president of legislative affairs at the Aerospace Industries Association, an Arlington trade group of aerospace and defense manufacturers. He said member companies complained that federal customers have hired junior engineers away to fill senior government positions for $10,000 more and manage the project they previously supported as private contractors.

“The stories are not good, and yet companies are afraid to complain too loudly because they’re worried about retribution,” Sterling said, noting that some jobs are truly “inherently governmental,” but added “If not — do what’s in the best interest of the taxpayer.”

Competition for talent has grown more fierce, said SAIC Inc.’s Brian Keenan, executive vice president for human resources. The McLean-based company saw as many as 100 employees move annually to federal positions in 2009 and 2010 — about four times as many people as in prior years. Like most large contracting companies, SAIC can’t offer employees long-term guarantees beyond their immediate projects, but Keenan said the company aims to hire people for career positions — not one-off assignments.

“We’re living up to that challenge,” he said, noting that SAIC continues to hire 400 to 600 employees per month. “Quality work and performance create opportunities.”

Keenan doesn’t expect a swift pendulum swing back in favor of the contracting community anytime soon. He predicts widespread retirements from the federal work force will create significantly more government career opportunities. He also pointed to overall increased demand in certain emerging areas, such as cybersecurity.

The administration authorized the DHS to hire up to 1,000 cybersecurity specialists by 2012, just after Microsoft Corp. exec Phil Reitinger joined the department as deputy undersecretary of the National Protection and Programs division. He previously held cybersecurity roles in the Justice and Defense departments. Bruce McConnell left the D.C. consulting firm he founded to serve as counselor to Reitinger. His last stint as a federal employee was in the 1990s, when he served as the OMB’s chief of information policy and technology.

“The attractiveness may depend in part on the field,” McConnell said. “In cyber, we can see over time that the government’s role and responsibilities will increase, so it’s a good time to get in on the ground floor. I also believe the ability to make an impact can be bigger when you’re on the inside.”

When it comes to a potential staff exodus, McConnell’s advice to the contracting community is simple: Don’t fight it. Just as companies benefit from having ex-government on staff who understand the federal culture, they also reap rewards from having employees who understand commercial business practices work inside agencies.

Companies “need to keep in mind that the way to be successful in this market is to be in it for the long term,” McConnell said. “There’s a definite advantage to having the reputation as a company that supports employee development and recognizes the appeal of a call to public service.”